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Fair Tax or Flat Tax?

July 1, 2013 By E.J. Smith - Your Survival Guy

Is a “Fair Tax” or a “Flat Tax” better? The answer is both are better than what we’ve got now. But real tax reform is wishful thinking. As Stephen Moore of The Wall Street Journal writes:

On Thursday Senate Finance Committee Chairman Max Baucus of Montana and ranking Republican Orrin Hatch of Utah unveiled their sweeping tax reform plan. It’s eloquently simple—a blank-slate, literally. But is it a gimmick? And what are the prospects this year for reform?

The plan starts with the presumption that the tax rate on individual filers and corporations will be shaved to as low as possible, perhaps down to 20% (from 39.6% for individuals and 35% on corporations), and that all deductions and carve outs will be eliminated. The senators stress that tax expenditures and other provisions should be added back only if they help expand the economy, make the code “fairer” or advance important policy objectives.

To some, this is unworkable. To others, it’s a brilliant strategy to put the onus on special interest lobbies to justify their favored treatment. The “blank slate” idea is meant to show the trade-off between deductions and tax rates. “Every $2 trillion of individual tax expenditures that are added back would, on average, raise each of the seven individual income tax brackets by between 1.3 and 2.2 percentage points from what they would be under the blank slate,” the letter states. “Likewise, every $200 billion of corporate tax expenditures that are added back would, on average, raise the top corporate income tax rate by 1.5 percentage points.”

Tax reform advocates, like Americans for Tax Reform, say they strongly support the notion the senators put forward of broadening the tax base and lowering the rate. But skepticism abounds. One Senate tax aide tells me, “I’m afraid senators will line up to defend a lot of the worst and most expensive deductions in the code, in order to score points with special interests. Who is going to vote against them?”

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E.J. Smith - Your Survival Guy
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998.

E.J. has trained at Sig Sauer Academy in Epping, NH, NH, where he completed course-work in Practical and Defensive Handgun, Conceal Carry Pistol, Shotguns, Precision Scope Rifle and Kidnapping Prevention.

E.J. plays a Yamaha Recording Custom drum set with Zilldjian cymbals. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris.

Please get in touch with E.J. at ejsmith@yoursurvivalguy.com

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